Market Awaits China's Growth Report

All eyes will be on China’s second quarter gross domestic product numbers when they’re announced on Thursday.

Will China’s economy show something like the 11.9% growth of the first quarter (danger, Will Robinson), or a big drop to 8% (worryingly too slow) or come in just right? (See the latest forecast from the International Monetary Fund (IMF) on the rest of the global economy in this post.)

The numbers announced in the run-up to the GDP report haven’t given much away.

Exports soared in June, climbing 44% from June 2009. That’s a sign that China isn’t feeling the effects of a slowdown in European economic growth. At least not yet.

Imports grew by 34.1% in June 2010 from a year earlier. That’s down from the 48.3% year-over-year growth in imports in May. Imports are an indicator of the growth of China’s domestic economy: If China’s companies and consumers are cutting back, imports will slow. So, maybe this is a sign that efforts by China’s government to slow the economy are paying off.

Money supply, as measured by M2, grew by 18.5% in June from a year earlier. In other economies, that would be a sign that inflation is on the way and that the economy is growing too fast. But in China, the message is much more mixed, since that 18.5% growth in the money supply is down from the 21% year-to-year increase in May and a high of 29.7% gains in November 2009.

With this kind of non-trend, I’d be surprised if many investors placed big bets on the direction of Chinese stocks before the report on Thursday—and they may not even then.

Full disclosure: I don’t own shares of any company mentioned in this post.